Blog assignment #8

Now, this blog post will finalize my blog updates since my semester here at Texas A&M is coming to a close. So it would make sense to take a look at how real estate in America will look in the years to come. During the last decade we have seen a huge increase in house prices and in a matter of months a decline just as big resulting in a complete freeze in the lending market. Now, real estate value is recovering to unprecedented levels - but where will this run take us?


I came upon this article, that tries to describe how the real estate market will look going out in the future. The main point is that the real estate market will be 'older, poorer and more diverse' but I will try to look in to the three drives of this change. The article is online and can be found here http://fortune.com/2014/09/17/american-real-estates-future-older-poorer-and-more-diverse/

1. The single most largest group in the population is 23 years old. This should be a good argument that the real estate will grow as these people are studying and hence are projected to take on a loan to afford housing. However, research shows that 3 out of 10 people with student loans default on their payments creating a trend where banks are more reluctant to give out loans. This might hurt the real estate market in the long run.
2. This group is more diverse than historically. So not only is the largest group of the population more indebted it also represents a demographic diversity that will put a damper on the real estate market going forward. Also, millennials are growing up in an age of increasing income inequality in which many members of the generation can expect stagnant wages. This, as well as the diversity of home buyers will hurt the real estate market.
3. The second biggest age group in America is 54 years old. This generation will impact the real estate market largely since they are in the economic prime of their lives. Their decisions on real estate and housing will largely impact how the real estate market will look like.

In real estate in general, we are already seeing an increase in age restricted residential housing to accommodate the expanding senior population. These people look for smaller and easy accessible housing and as this transition is occurring, their children look for suburban homes that can fit a whole family.


So, real estate will be older, poorer and more diverse to fit the changes in the underlying society. However, there's no way to be perfectly sure that these are going to be the changes that will occur. Real estate might even look like this in a century and two.


https://blog.lookout.com/wp-content/uploads/2011/09/the-jetsons.jpg


That's a wrap!

Blog assignment #7

I would just briefly like to extend the thoughts provided in my previous post to this article I came upon in the Wall Street Journal

http://www.wsj.com/articles/real-estate-investors-shift-focus-to-new-developments-1413311706

Previously, I wrote about the risks of real estate development. According to this article, companies are now demanding these developments and redevelopments of properties in high income properties that also offer higher risks. The article revolves Boston Properties that are now pivoting their investment strategy towards these high risk pieces of real estate. Mr. Zuckerman, the chairman of Boston Properties expresses that "we're certainly more bullish on development than buying buildings". Since the credit crisis, real estate development is once again doing very well.

As I pointed out before, real estate development is one of the most risky lines of real estate business. If the economy sours, companies are often reluctant to sign pricey long term leases leaving developers with vacant spaces that create no income. This transition towards the risky real estate development must therefore be a sign of an increase in confidence in the real estate market in general which is very positive for the economy.

To take an example, Boston Properties recently bought this magnificent piece of real estate in down town Manhatten. Fomally known as the City Group Center, this building located on 601 Lexington Avenue was bought to reflect the change in strategy - higher income and higher risk. They expect that this property as well as two others in Boston will put the company on track for more than $2 billion in property sales.

I have just included this example to illustrate the gained confidence in high end development and the demand for these. Real estate development is not expected to slow down in the coming years so we can expect buildings like these go be developed and be sold for an even higher amount of money. Of course, only time will tell.

Blog assignment #6

Risks of real estate

During my studies I came across this interesting article about the risks of during real estate development. I must admit that real estate development is the part of this real estate class that intrigues me the most. However, after the collapse of huge real estate institutions like Fannie Mae and Freddie Mac during the credit crisis the risks of during development have become even more evident. Let me just highlight some of the points that this article come across.

First of all, he points out the most important thing in investment - diversification. When doing development, it's of utmost importance that all developments you do are not in the same line of business. You must diversify your development portfolio over several sub categories like retail, commercial, residential etc. This will lowers the risk of developing real estate.

Also, as a real estate developer you must be aware about two more things both related to risks. First of all, since all real estate projects have their own risk, you must know what kind of risk a specific project has. This includes among other;

• Land value risk - what is the value of the land you are building real estate on.
• Planning permit risks - what are the risks in planning the construction of real estate. Are there any zoning restrictions as well as easement requirements that you should be aware of as a developer. If these restrictions are not covered early, whole real estate projects might fall apart because the use of the real estate on that specific piece of land might not be used for the designated purpose.
• Revenue risk - will the real estate give you a revenue. If the market for real estate is bad, this risk is specifically high since vacancy rates will be high as well.

These are some of the risks that one must account for on a project level. This list is far from exhaustive but just illustrates some of the points and risks for a real estate development. However, as a real estate developer you also have to decide what kind of development you want to do. Retail, offices, industrial and residential are some of the categories. Supply and demand will determine what is the most profitable. Say in College Station, Texas, the demand for industrial property is very low, but for student housing very high and still increasing. Hence, almost all development here are of residential character in order to saturate this demand.

http://www.globalriskconsult.com/article-6-real-estate.php

Blog Assignment #5

Now, after I went to Los Angeles, our trip took us further up to San Francisco and Napa Valley. San Francisco was probably my favorite place of the cities we went too - I liked the hilly geography and the smaller houses. However, for the blog I will now return to the main objective of doing this - which was to compare real estate in Denmark from how it is in America.

If I were to say what sets Danish real estate a part from not only the US but for the world, it would be the architecture. Denmark is world renounced for their architectural abilities and prints of this ability can be seen all over the world.

The first piece of real estate I want to highlight is an iconic building build close to the central business district at the harbor point of Sidney. The Opera House was constructed in 1972 and drawn by Danish architect Joern Utzon.

It has been an iconic landmark of Australia since it's opening and shows how innovative and how much impact Danish architecture has on the world. Another good example is a newly opened educational program center in Damaskus in Syria. Made by Danish architectural company ' Henning Larsen Architects' this is a state of the art educational center to support young people in Syria.

The building's outside is inspired by the Danish rose. When they build the building the architectures wanted a shell structure allowing a playful and dazzling scenography of light into the interior spaces - like light filtering between rose petals. All of the administrative areas are placed within these petals creating a labyrinth of hallways inside the peace of real estate. These pathways are inspired by the walk in the streets of the old city of Damascus formed by the walls and with only the sky as the window.

Quite clearly, Danish architecture has a huge impact around the world these two are just examples on the impact. 



Blog Assignment #4

Blog Assignment #4
After our trip to magnificent Las Vegas, we went south towards the Grand Canyon, Phoenix, Arizona and San Diego before ending up in Los Angeles. As the tourists we were, we had to see the famous Hollywood sign on the hills of Los Angeles. Even though the size of the sign surprised me, I wanted to figure out some more about the history of the sign - how much is the sign even worth.
Even though there quite clearly are some easements or zoning restrictions to the land where the sign is attached I've found this article that summarizes the story of the now 90-year old sign. The link has been provided underneath but I will highlight the fun an interesting details:

http://www.history.com/news/90-years-later-8-things-you-may-not-know-about-the-hollywood-sign

So, the sign was made in 1923 for a mere $21.000 as a commercial for a real estate project in the vicinity called "Hollywoodland". It was made to promote the area as a capital for movie and entertainment and quickly became an institution around Los Angeles and included light bulbs so it could be seen during the dark. In today's value it would be around $250.000 but that's a small number compared to the extend of travel that the sign provides to Los Angeles. I have added some fun facts about the sign underneath.

• The sign originally stated Hollywoodland but four of the letters were removed after the city of Los Angeles took over ownership in the late 40ies.
• The sign has been replaced one due to wear and tear 50 years after it was first put up.
• Four letters have been removed during time - one of them fell of the attachment and another was set on fire by arsonists.
• To prevent luxury homes to be build around it, a number of movie studies, actors, and foundations raised the $12.5 million dollars asking price to keep it the way it is.

The Hollywood sign still stands as advertised and it was a funny experience to see it in another way than just through the TV. Imagine that just the lot surrounding the sign is worth $12.5 million dollars - the worth of the lot with the sign must be worth much more than that. The asking price of that lot can only be imagined.

Blog Assignment #3

Blog assignment # 3


For the last part of the blog assignment, we were instructed to add six additional posts that illustrates what we like about real estate. I would start the first post up, by looking back at my recent road trip that started in Las Vegas and ended all the way in San Francisco.


Our stay in Vegas started at the Luxor which at the time build as the largest building of the strip. Both from the outside and in, this piece of real estate is truly magnificent. However, the fun thing about this place is, that the outside dimension as build exactly to replicate the sides of the Red Pyramid of Egypt.


During my road trip in the Thanksgiving break I stayed in the Luxor, but real estate on the strip is really difference. Where a shower and a bed is sufficient in normal hotel rooms, here everything has to be bigger, better, or more beautiful due to massive competition. Hence, the extravagance of hotels in Vegas go far beyond the Luxor - there's a hotel with a rollercoaster as well as a hotel with indoor facilities to host a knight's show. This is utterly insane compared to Denmark where a simplistic room is much more preferred. But I guess it goes with the saying that 'the city that never sleeps'.

Source: Wikipedia

It's quite clear where the inspiration for the Luxor comes from. Even though that the hotel is an amazing building, I can't imagine how hard it must have been to build a structure of the same size 4000 years ago. Both pieces of real estate are truly worth thinking about and admire.

Blog Assignment #2

Blog Assignment #2


Task #1


Real estate defined by American terms is imply a designated piece of land and the improvements that's made to this piece of land. Basically, these improvements can consist of all sorts of items but they are categorized as improvements when they are reasonably permanently affixed to the land. By reasonably permanently affixed to the land, one can test for fixture status of the chattel. The test is in three steps:

1. A test of intent. Is there an intent from one of the parties in the RE agreement.
2. A test of attachment where you look at if the item can be removed  without injury to the real estate.
3. A test of adaptability where you look at how the real estate would be if the affixture wasn't there.

Thus, real estate is tangible and immobile and consist of what's permanently attached to the piece of land. This is to be compared to real property that is the rights that are attached to the ownership of a real estate. Real property is therefore a bundle of right's that one achieve when you acquire real estate that you can choose to use, sell, lease etc. if you want to.


To look at the rights of properties, I have found this little clip that explains property rights in a rather peculiar way. The power of property rights are explained through the common ownership of surf waves where there are specific rules according to who's on the wave first and how many that can be on one wave. The video is self-explanatory, and you can take a look at it right here: https://www.youtube.com/watch?v=jnjPFZV8Wqo


Task #2


There are some restriction on the ownership on land that can be enforced. These can be either private or public. This is a description on what private restrictions on ownership is as well as some examples to back it up.


Private restrictions are limitations that run with the piece of land that you own. These private encumbrances can be either financial (e.g. liens) and/or non-financial (e.g easements).

• Covenants, conditions and restrictions: These are restrictions that are explicit in the deed of the real estate. This could be that one can't sell alcohol on the property.
• Lien: This is a financial claim on the property for the debt in the real estate. These can be voluntary (e.g. a mortgage payment) as well as in-voluntary if the owner of the real property has for example unpaid taxes.
• Easement: An easement is a right given by the owner of real estate for another to use the piece of land in a specific way. These can be appurtenant easements where there's a dominant and estate and burdened estate (e.g a drive way passing one real estate to get to the one behind) and/or easement in gross where there are only servient estates (e.g. high power lines)
• Adverse possession: This allows individuals to acquire real estate even though they do not own it but because they have openly possessed it for a statuary period of time.

There are several private encumbrances that restrict how you can use you property. The example I'd like to give is a trend that's risen after the financial crisis in 2008 where more and more people defaulted on their mortgages resulting in empty houses. So called squatters go in and live there for a statuary period of time and if they openly declare that no one should trespass they can declare the legal right of 'adverse possession'. Thus, this man has been living in a multi-million dollar home for the last seven months - doing so without paying a dime. Follow the URL for the whole story:


https://www.youtube.com/watch?v=bOiUE0Yo2t4


Task #3


As mentioned in task #2, restrictions can not only be private but there can also be public restrictions that limit the usage of your property. The government powers are generally split in four and elaborated upon underneath:

• Taxation: The government can impose an ad valorem tax on your property. Thus, if you are the owner of the property then you are liable to pay the state property tax.
• Eminent domain: The government can also acquire you property for the public use of your real estate. This could be if it's beneficiary for the community e.g. there's a highway that's being built through your real estate. The owner of real estate can file for compensation of the government buying him out of the house (just compensations). Also, if and adjacent property feels like his/her property has lost value after the eminent domain they can file for inverse condemnation.
• Police Power: This restriction enables the government to be able to regulate if there dangers to the health and general welfare of the public nearby.
• Escheat: Escheat enables the government in case of the death of a person with no close relative to cease the real estate. The power of the property thereby falls to the state/crown.

There are several more ways the government can restrict ownership of private property, including takings etc. However these are some examples of how restrictions can apply to our real estates. In later years in America, we have experienced an increase in the government's use of eminent domain hereby taking people's homes and compensating them with what's fair value. This article from CBS illustrates how people fight back on the government wanting to tear down a 100 year old neighborhood to make brand new condominiums. The fight is still going on and as of now, the couple in the article living just outside of Cleveland can stay where they are.. for now.


For the article, follow: http://www.cbsnews.com/news/eminent-domain-being-abused/